Levi Strauss & Co.

About Levi Strauss & Co.

Pioneering American apparel maker Levi Strauss & Co. (LS&CO.) has jeans in its genes. A global manufacturer of brand-name clothing, LS&CO. sells jeans and sportswear under the Levi's, Dockers, Signature by Levi Strauss, and Denizen labels in more than 110 countries. It also markets men's and women's underwear and loungewear. The Haas family (descendants of founder Levi Strauss) controls LS&CO. LS&CO. distributes its brand products through more than 650 company-operated stores located in over 30 countries, and through the third-party and first-party online stores. LS&CO. makes around 80% of its revenue from Levi's branded men's pants. Its top markets are in the US, France, Germany, Mexico, and the UK.

Operations

Directly or through third parties, LS&CO. designs, markets, and sells jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear, and related accessories for men, women, and children. Company-operated and online stores generated about 26% of fiscal 2015 (ended November) revenues (with more than half that coming from its online stores alone) as compared to 25% during the prior year.

LS&CO. distributes its Levi’s and Dockers products through more than 656 company-operated stores located in about 31 countries, including the US, and through the third-party and first-party online stores. The company distributes its Levi’s and Dockers products nationwide through chain retailers and department stores. Outside the US, it distributes products primarily to department stores, specialty retailers, and nearly 2,100 franchised and other brand-dedicated stores.

By product, LS&CO. generated 77% of its total revenue from men's products in FY2015. Pants made up 81% of total revenue, and the Levis' branded products generated 85% of total revenue.

Geographic Reach

Iconic LS&CO. sells its products in more than 110 countries. It operates manufacturing, distribution, and finishing facilities in the Americas, Europe, and Asia/Pacific regions. The company's Americas segment contributed about 61% to its total revenue during FY2015, while its Europe and Asia (which counts the Middle East and North Africa) segments contributed 22% and 17%, respectively. Its key markets are the US, France, Germany, Mexico, and the UK.

Sales and Marketing

A multi-channel marketer, LS&CO. sells its products in more than 50,000 retail locations worldwide. Its brands lend themselves to a variety of retail formats, including chain retailers (JCPenney, Kohl's, Wal-Mart, and Target), department stores (Macy's, Nordstrom, and Barney's), and company-operated e-commerce sites and online stores of other retailers. Sales to its top 10 wholesale customers have accounted for approximately 31% of revenues for each of the fiscal years 2015, 2014, and 2013.

Altogether, LS&CO. spent $276.4 million on advertising in FY2015, up from $272.8 million and $274 million in fiscal years 2014 and 2013, respectively.

Financial Performance

LS&CO. has struggled to grow its revenues over the past few years. Its profits, however, have risen more than 50% since 2011 as it's managed to cut its overhead costs and interest expenses by paying down its long-term debt.

The company's revenue dipped 5% to $4.5 billion during fiscal 2015 (ended November 29, 2015) mostly due to unfavorable currency exchange rates. In constant-currency terms, its revenue grew 1% as it expanded its retail network in Europe and Asia.

Despite revenue declines in FY2015, LS&CO.'s net income nearly doubled to $209.44 million thanks to a combination higher margins, lower restructuring costs, and lower debt-related expenses. The company's operating cash levels shrank 6% to $218 million for the year mostly due to higher payments to vendors and pensions.

Strategy

LS&CO continued in 2016 to follow a handful of growth-oriented measures, including: driving profitable growth of its core men's pants brands (Dockers and Levi's); expanding its brand reach and diversifying into new or undertapped geographic markets, including China, India, Russia, and Brazil; becoming omni-channel through online stores, franchises, and company-operated stores; and improving its cost structure to ensure long-term profitable growth.

The company has made great strides toward improving its cost structure in recent years. In March 2014, LS&CO. announced a global productivity initiative -- to be phased executed in phases over the next 12 to 18 months -- that when completed is designed to save it $175 million to $200 million annually. Actions included streamlining the company's product development, planning, and go to market strategies, as well as implementing supply chain and distribution efficiencies, among other cost saving measures. To its credit, the initiative has been a success: the company nearly doubled its income in FY2015 alone thanks to many of these cost-cutting measures.